Jan 29, 2013

A devastating fire in Bangladesh two months ago has left 112 people dead. The matter is being blamed on lax enforcement of labor laws. Companies operating in Bangladesh should be aware that the government is beginning to crack down, because of these many similar issues on companies that are perceived to be taking advantage of workers.

Do yourself a favor and conduct a thorough compliance audit of your business. The Bangladesh government will be conducting more inspections and will likely begin to file more prosecutions and fine more companies. Avoid the embarrassment and get a compliance audit done immediately.

The problems in Bangladesh seem to lie within the negligent way that labor and workplace safety laws are enforced. It has been pointed out that adequate exits and fire extinguishers would have prevented the ensuing stampede and inferno.

Factory officials claimed that firefighting equipment was available at the site, yet a member of the fire fighting brigade stated that the equipment was nowhere to be found. This was in direct violation of a law that requires all garment factories to be certified by the fire service to operate; according to a senior official of the fire service, quoted in the article below, the factory “didn’t have a fire license and so there was no way they could have received a factory license.”

The factory, which produced garments for Inditex did not even have a factory license - amazing. The question that should be asked is, how did a garment factory without even a license to operate as a factory become a vendor for Inditex, one of the largest textile companies in the world? We all know how this occurs.

The perils of working in manufacturing companies is, generally,
well-known by employees of their companies. Samsung has been targeted,
recently, as a company that has not informed workers of the risk at
working at their plants.

At my office near Samsung's
office we, regularly, hear the chants from protestors. The majority of
the protestors have protested in order to claim compensation from Samsung
for injuries that were alleged to be caused to workers and the family's
of workers based on exposure to toxic chemicals. A causal relationship
is, often, difficult for the plaintiffs to prove, thus, they have turned
to political tools at solving a perceived unethical treatment of these
employees.

The protest I see the most is a protest
concerning the increased risk of contracting leukemia from the chemicals
utilized in the semiconductor and cell phone manufacturing processes.
Many of the chemicals have been banned in other countries.

In
the recent matter, an employee died shortly after being exposed to
diluted hydrofluoric acid that was leaking. We may never know how many
workers were exposed, but we need to realize and appreciate the
significant risk that these workers are exposed to working in these
plants.

Prayers go out to the families and
congratulations to Samsung for not trying to hide an issue that should
be further addressed with the assistance of the incoming administration.
_______
Other articles from the media that may be of interest:

In preparation for a BBC television interview (which failed to happen
due to Skype Internet difficulties), I looked into the indicators and
foundations of current South Korean sentiment.
What I discovered was much less sanguine than official Bank of Korea
statistics that the news agencies and embassies frequently quote.

In
addition to the below excellent report from which I can personally
recognize a number of young Koreans who fit the article's descriptions,
please consider findings from Gallop Korea's recent report.
During the second half of each November, Gallop Korea polls some 1500
South Koreans above the age of 19. This past November's results were
largely similar to those of November 2011, polling sentiments about the
coming calendar year.

Of interest is that the first two
questions' results, given the 2.1% margin of error, were statistically
identical for the past two years. If there is any optimism about 2013,
it would be because there is a 6% rise in expectations that unemployment
will decrease versus a 3% drop in those expecting unemployment to
increase. Still, given that half of the population believes
unemployment will rise in 2013, I would caution government workers and
politicians not to cheer too loudly.
Now, contrast the above with today's Reuters news release on the Bank of
Korea's sanguine report that customer sentiment was the strongest in 8
months at 102 versus Decembers 99 score, with 100 representing neutral
feelings. The BOK also projected the coming 12 months to be just 3.2% -
which is entirely in line with fantasies that this government agency
has been broadcasting for the past years.

Obviously,
whoever decides what goes into the economic basket of indicators has
considerable influence on the results. For most South Koreans, more
significant inflation can be seen in the substantial increases of food
prices, utilities (electrical rates alone were hiked 4.9% last August
and will go up another 4.0% this month). And many expect taxi rates to
soon rise.

When it comes to unemployment, the most
important figures are those assigned to young people. While the
national unemployment average is officially recognized as being only
3.0%, only 60.1% of Koreans in their 20's are recognized as
participating in the economy. And, of course, to have a part-time job,
including working at a convenience store with a college degree, means
one is "employed." Even so, at the end of 2012, youth unemployment was
recognized to be only 7.5%.

No one seems to bother,
however, how to reconcile 39.1% of young people being economic
non-participants with just 7.5% unemployment.
As the below article points out, Korea's largest 194 companies this past
year offered 18,950 (down from 20,500 offered the previous year) career
potential, entry-level jobs. Considering that virtually all South
Koreans complete high school and a good 80% graduate from college or
university, it is unsurprisingly that in 2012 a large portion of the
300,000 college graduates competed for those 18,950 jobs.

Possibly
due to many discouraged job seekers having returned to college to gain
additional degrees, we may expect as many 500,000 graduates out on the
job market as soon as 2015.
As the below article points out, many young Koreans have pretty much
given up on marriage and raising children. It comes as no surprise that
South Korea has one of the lowest birth rates among OECD countries.
While many countries have a traditional pyramid-shaped demographic
profile, South Korea has a distinctly diamond-shaped profile.

Finally,
allow me to suggest why the consumer price index is as good as it may
be. It could well be that many Koreans in their 20’s and 30’s are
living at home, forsaking marriage without saving for their independent
housing, but making the best out of a dire future by living for today by
consuming more for short-term pleasures to somehow make up for their
long-term disappointments.
Given all of this and much more, the "news" about small, single-digit
improvements in government statistics about CPI, inflation, unemployment
seems divorced from the greater reality that makes up most Koreans'
lives.

The real story is much more complicated, but few
international news agencies take the time to dig down and discover what
is actually happening with the majority of South Koreans.
The real story is much more fascinating, if at times grim, suggesting
that Korea could be operating on a two-part economy - that of large
companies and the wealthy as opposed to that of small- and medium-sized
companies and the majority of South Koreans. But that topic must be
reserved for another message.

_____

SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.
www.ipglegal.com

Jan 25, 2013

The Seoul taxis, again, are threatening to go on strike because of
the veto of a transportation bill by the president. The bill intended
to deem taxis a means of public transportation.

I have
the pleasure to ride in a taxi, at least, twice a day. This allows me
to discuss the plight of taxi drivers with the drivers. I have talked
to dozens of drivers about the issues affecting their livelihood and
most see their future not in the taxi business, because of the high
price of fuel and increased competition. However, most believe they
have few other options.

The majority of taxi drivers, I have spoken to, drive 12 hour shifts six days per week.

Most
drivers are struggling. Think about this. An hour ride to the airport
will cost you around KRW 50,000 from my door in Hannam Dong to Incheon
airport. This is thought of as a great fare, because of the lower cost
of fuel and more efficient use of the vehicles time, because of the lack
of need to pick up more passengers. However, the driver risks not
obtaining a passenger for the ride back to Seoul.

Most
drivers claim that expenses account for 60% of the fare. Thus, they
bring home around KRW 20,000 for the ride according to the drivers.
Seems to low to me. I always give a tip and, these days, it is greatly
appreciated.

The largest expense drivers have is
fuel. The best solution seems to be to cut the fuel tax for tax
drivers. What is the big deal? Cut the tax.

I suggest
cutting the tax, however, only in exchange for an enforceable passengers
bill of rights that includes a driver being required to pick up all
passengers - yes - even at night.

_____
SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

Jan 23, 2013

The Korean Constitutional Court, late last year, declared the real
name identification verification requirement in the Act on the Promotion
of Information and Telecommunications Network Use and Protection of
Information that required some providers of internet services with
forums, bulletin boards and the like to confirm the identity of all
users prior to the user being allowed to post comments on the site
unconstitutional.

The Act specifically required any
company or individual who operated any type of website with over 100,000
visitors per day, on average, that allowed users to create content, to
confirm the identity of the person prior to allowing them to post
content on the site.

Over 130 sites were required to obtain confirmation of the identity of users intending to post comments.

The Constitutional Court ruled, in part, that the confirmation of identity requirement is unconstitutional since:

1. Other less restrictive means are available to identify those that violate the rights of others;
2.
Little evidence exists establishing that the requirement leads to a
substantial reduction in the quantity of illegal information online; and
3. There is a potential risk that personal information of users could be misused.

The
vast majority of sites have chosen to maintain, voluntarily, the real
name verification system and we advise anyone intending to scrap their
present system to consider the numerous interrelated laws that have not
been deemed unconstitutional prior to changing their user identification
policy.

________
SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

Jan 22, 2013

We have used, for all cases we were involved in regarding the layoff
of Korean workers, accountants to argue that the layoff is for urgent
managerial need. We have, often, been questioned by clients if the
extra expense is necessary. Yes the expense is necessary and here is
why.

A case last year shows the need to utilize
accountants in all cases where an employer intends to layoff workers
based on "urgent business necessity" under the Korean Labor Standards
Act (LSA).

A case handed down by the Supreme Court in
the first half of last year ruled that a layoff did not violate the
LSA, since urgent managerial necessity existed because of "external
factors," including the lack of overseas demand for the employer's
products.

The Supreme Court confirmed the holding of
the High Court that noted that the District Court was wrong in
emphasizing the possibility that overall production and profits will
increase from a newly constructed factory and the economic issues of the
employer were based, in large part, because of interest and
depreciation costs.

The interesting aspect is not the
holding. The interesting part is that no accountants were utilized in
the District Court case (loss for the employer) and accountants were
utilized in the High Court and Supreme Court case (win for employer).

Economic
analysis, appraisals and expert witnesses should be utilized for all
cases concerning the layoff of employees for urgent business necessity
in Korea.

Jan 21, 2013

Many Korean law firms have been willing to work in relationships
based on a non-time charge flat-fee or contingency basis for Korean
clients. However, many of these law firms in Seoul have been unwilling
to work on alternative fee arrangements with non-Korean clients, because
of, among other things, the requirement to represent the client in a
far different manner than that of a Korean client and, also, reduced
competition in the foreign-client market, because of the reality that
only a few attorneys in Korea are capable of handling the needs of
international clients in Korea.

Korean and foreign
clients, often, have different expectations of the role of attorneys. A
Korean client is, often, willing to be a passive participant, since the
client knows the attorney is motivated, primarily, through a
significant contingency fee. Contingency fees are common in Korea in
all matters, including criminal and family matters. Thus, clients often
"trust" an attorney because of the knowledge that little money will be
earned if the client doesn't prevail.

However, I
believe these flat-fee type arrangements, normally, lead to unsatisfied
foreign clients, because of the want of these foreign clients to obtain
more personal service and, also, be an active participant in the matter.

The
clients that come to us, often, had significant issues with other
attorneys, because of an inability of the attorneys to adequately
communicate with the client and the perception, often rightfully, that
the attorney was too passive in representing the interests of the
clients.

I believe the solution to this issue is not mere flat-fee billing, but a more nuanced "limited scope representation."

Often
clients would like to be an active participant in the matter. In many
cases, a corporate client has the ability an wherewithal to be an active
participant. Thus, for the cash strapped clients it is, often,
advisable to negotiate with the law firm to work under a "limited scope"
basis.

Thus, some of the matter will be handled
directly by the corporate client with, only, the guidance of the
attorney and some of the matter will be accomplished by the attorney
alone or in coordination with the client.

This situation often allows the foreign client to reduce its expenses, while, also, being an active part in the matter.

Jan 18, 2013

The Park Administration has proposed the creation of a new ministry
called, potentially, the Ministry of Future, Creation and Science
(MFCS). The name sounds a little better in the Korean language.

The
MFCS will be, primarily, involved in promoting investment in research
and development. I am hopeful that the MFCS or whatever it will finally
be named will not be a tool to simply return taxes to conglomerates.
Korea is in desperate need of growth in the SME sector and new
businesses to compete with the ubiquitous and, hopefully, the MFCS can
play a vital role in satisfying this need.

Other proposed changes in the Korean Administration include:

Creating the post of Deputy Prime Minister of Economy

Creation of a Ministry of Maritime Affairs and Fisheries

Trade Section of Ministry of Foreign Affairs moved from MOFAT and merged into the Ministry of Knowledge Economy

Korean Food and Drug Administration moved from the Ministry of Health and Welfare to the Office of the Prime Minister

Creation of the Social Security Commission

Establishing a National Security Office in Cheong Wha Dae

______
SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

Jan 15, 2013

The U.S. president has signed the North Korean Child Welfare Act into Law. The bill, in short, urges the U.S. Secretary of State to protect North Korean children in nations outside of North Korea. The bills were passed by Congress with a unanimous vote of each chamber.
Numerous orphaned North Korean children are living in China in less than adequate conditions. Many of the parents of these children have been repatriated back to North Korean from China by force.
The Act specifically notes that the Secretary of State must "brief appropriate congressional committees on efforts to advocate for and develop a strategy to provide assistance in the best interest of these children."
South Korea has been unable to pass like human rights bills in the Korean National Assembly because of vocal opposition from liberals.
_________
SeanHayes@ipglegal.com
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

Jan 13, 2013

The petition of a 41-year-old alleged prostitute to forward a case on
the constitutionality of punishing a prostitute for exchanging sexual
favors for money has been accepted by a judge at the Seoul Northern
District Court.

I
will update the readers of this blog when the decision of the
Constitutional Court is handed down HERE. I have been accused of,
only, having boring issues related to doing business in Korea. Ok guys -
two articles now that don't relate to business.

_______
SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

Jan 6, 2013

We receive emails, regularly, requesting advice on the protection of
IP rights in Korea and China. Most of the issues I addressed in this
blog come from these questions. I realized, after writing over 900
posts on this blog, that I never drafted a post on trade secrets. Don't
blame me, blame my paralegal. :)

Definition of Trade Secret
As
you probably know, a trade secret is, simply any design, process,
formula or the like that is not known or readily ascertainable by a
third party that may provide an economic benefit to the individual
possessing the trade secret. Notwithstanding, non-compete and
non-disclosure agreements, Korea and most countries, typically, only
protect trade secrets against an alleged violator when the alleged
holder of the trade secret makes a "reasonable effort" to protect the
trade secret and is able to establish that it has made this reasonable
effort to protect the trade secret.Protection of Trade Secrets in Korea
1. Identify your
Trade Secrets. Draft a document in English and Korean identifying the
trade secrets of your company. This does not mean you need to write
down the specific details of the trade secret. Example: Formula for the
Manufacturer of a Black Carbonated Beverage better known as Classic
Coke.

2. Non-Disclosure &amp; Non-Compete
Agreements. Have all that you do business with sign detailed and
Korean-specific Non-Compete and Non-Disclosure Agreements. Include a
liquidated damages clause in these agreements. These agreements should
be executed by all suppliers, employees, directors and others in Korea
that you are doing business with.

3. Put in Place a
Trade Secret Protection Scheme. Before creating a trade secret
protection scheme please consider how your trade secret is likely to be
misappropriated by others - think, at a minimum, employees, vendors,
suppliers and customers. After the analysis, write down the scheme and
integrate the scheme into your business. We strongly advise discussing
the scheme with a business or legal consultant.

4. Due Diligence. Due Diligence in hiring, firing, engagement with outside business partners and vendors.

5.
Enforce Your Rights. If you are not willing to enforce your rights in a
Korean court - you will, likely, become known as a company with
softball managers and will, thus, likely be the victim again in the
future. Don't forget even the large Korean conglomerates are engaged in
litigation to protect their IP - some of this litigation is, simply, to
defer future violators.

______
SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

Jan 4, 2013

One of the major parts of my law practice for international clients,
in Korea, is the structuring of joint ventures and the resolution of
joint venture disputes in court and through arbitration. I find, in
most of these cases, the non-Korean party is not in need of a joint
venture with a a Korean party to succeed in Korea and the Korean party
does not realize or has no intent in satisfying obligations under the
joint venture agreements.

Thus, many disputes are
caused by the realization by the non-Korean party that he/she doesn't
need the Korean party and the realization by the non-Korean party that
the Korean party had no intent in following the joint venture
agreement.

Do You Need a Korean Joint Venture to Succeed in Korea?

We
find that a joint venture is, normally, only successful in a few
situations. The following are the major situations that we encounter
that tend to make sense for both parties.

The Korean party has instant access to a proven distribution network
(retail outlets) or supply chain and the non-Korean has a product that
easily fits into this supply chain. Often this, however, is best
addressed through a distribution/license agreement and, not, a joint
venture agreement, but in some cases the joint venture makes sense. Be
careful, often a joint venture is not necessary and changed
circumstances can kill the relationship.

The industry is an industry closed to foreigners (few industries in
Korea as closed to foreigners - ie. publishing) and the Korean party
needs the expertise or money of the non-Korean party in order to succeed
in the industry. Be careful, needs often quickly change and, often,
these industries are heavily regulated and, often, lead into a money pit
that you will never dig anything out of. Knowing the governor does
not mean that you will receive government support. Everyone in Korea
has contacts, however, few are able to capitalize on these contacts,
thus, don't be sold a can of hooks.

The non-Korean party is broke and, thus, unable to commercialize an
invention and the Korean party is in need of a new product line or has
spare manufacturing capacity. Be careful, the learning curve may not
be as great as you think and this you may not be needed for too long.

The industry is a niche industry with only a handful of players and
the non-Korean can receive instant access to one of the main players
through the joint venture and the Korean is able to gain access to the
technology through the joint venture. Typically, this is a joint
venture between a Korean conglomerate (chaebol) and a multinational
company. Often these relationships are fleeting and lead us to many
hours in arbitration.

If you have money, have the expertise in doing business in Korea
(or can hire experts), are not in a regulated industry, carefully
consider the market, have a local guide and are not in a need of joint
venture because of the nature of the business - forgo the risk of a
joint venture and hit road in Korea on your own.

Sean
Hayes is co-chair of the Korea Practice Team for one of the leading
international law firms. He is the only non-Korean to have worked as an
attorney for the Korean court system (Constitutional Court of Korea).

SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

SEARCH THE KOREAN LAW BLOG

AsiaLaw Leading Lawyer in Korea: Sean Hayes

About SEAN C. HAYES

NY Attorney Sean Hayes grew up in Connecticut and New York to an Irish-immigrant father and Italian mother. He is a U.S. and Irish National. He is a permanent resident of Korea.

Sean Hayes is the first and only non-Korean to be employed as an attorney by the Korean Court System and one of the first non-Koreans to be a full-time regular member of a Korean law faculty.

He is rated as one of only two non-Koreans as a Leading Attorney in Korea by LawAsia. He is, also, rated a leading attorney by numerous other attorney rating services.

He is known over his 14+ years in Korea for his aggressive advocacy and candid NY-style street-smart advice.

Sean is, also, one of the few attorneys in Asia that has experience managing non-consulting companies and working as an HR Manager. He worked as an interim General Manager/Director for Oil & Gas, New Tech, Pharmaceutical, Franchise and Manufacturing companies.

He regularly appears in and is quoted by international media organizations including the NY Times, Wall Street Journal and international law journals.

In his free time Sean enjoys playing golf, drinking beer and carousing with his rowdy friends.

ABOUT IPG Sean's firm is, often, chosen over the ubiquitous Korean Law Firms when un-conflicted and aggressive representation is essential for success.

Sean and his Firm have been recognized by numerous legal publications and rating agencies.

Sean and IPG have, also, been involved in some of the most noteworthy contentious matters via arbitration and litigation in Asia in Korea, China, Vietnam, Laos, Myanmar, Bangladesh, Cambodia, the Philippines and the United States.